Tax Credit system closes, affecting pension-age CTRS eligibility

The Tax Credit system closed in April 2025, and pension-age recipients were advised to apply for either Pension Credit or Universal Credit based on their individual circumstances¹. Those who transitioned to Universal Credit became ineligible for pension-age Council Tax Reduction (CTRS), because current regulations exclude Universal Credit recipients of pension age from that support¹.

The Welsh Government has amended the definition of "pensioner" within the CTRS regulations to address this. The change is intended to ensure that individuals migrating from Working Tax Credit to Universal Credit continue to qualify for pension-age CTRS¹. The amendments are contained in the Council Tax Reduction Schemes (Prescribed Requirements and Default Scheme) (Miscellaneous Amendments) (Wales) Regulations 2026, laid before the Senedd with an explanatory memorandum prepared by the Council Tax Policy and Reform Division and signed by Mark Drakeford MS, Cabinet Secretary for Finance and Welsh Language, on 9 December 2025¹.

CTRS is the mechanism by which local authorities in Wales provide support to low-income households in meeting their council tax liability¹. Applicants receiving Income Support, Income-Based Jobseeker's Allowance, Income-Based Employment and Support Allowance, Pension Credit or Pension Credit Guarantee are entitled to the maximum, full reduction; approximately 35% of CTRS applicants in Wales receive these passporting benefits¹. For applicants who do not receive a passporting benefit, weekly entitlement is reduced by 20p for each £1 of excess weekly income above the applicable amount, until entitlement is withdrawn¹. Capital of £6,000 or less is ignored for working-age applicants, and £10,000 or less for pension-age applicants¹.

The instrument also uprates figures used to calculate entitlement for 2026-27¹:

The Welsh Government provided £244m in the Local Government Settlement for CTRS in 2013-14 and each year since¹. The 2013 CTRS Regulations were approved by the National Assembly for Wales on 26 November 2013, and all eligible applicants were automatically transferred from Council Tax Benefit onto Council Tax Reduction Schemes from 1 April 2013¹.

The instrument also introduces a capital disregard for payments made from the estate of a deceased person originating from an approved infected blood support scheme or the Scottish Infected Blood Support Scheme, and disregards payments under the LGBT Financial Recognition Scheme, with payments to eligible former service personnel scheduled to begin in March 2025¹. It adds references to Neonatal Care Leave and Neonatal Care Pay¹.

Why it matters for households

Pension-age households in Wales that moved from Working Tax Credit to Universal Credit after the Tax Credit system closed in April 2025 were excluded from pension-age Council Tax Reduction under the rules in force, even though pension-age recipients were advised they could apply for Pension Credit or Universal Credit¹. The amended definition of "pensioner" is intended to keep that group within pension-age CTRS¹. Pension-age CTRS uses a £10,000 capital disregard and £1 a week of assumed income for each £500 of capital between £10,000 and £16,000, compared with £6,000 and £250 bands for working-age applicants¹.

The uprating applies to the 2026-27 financial year¹. The memorandum states that the precise impact will only be quantifiable once local authorities have set their council tax levels and budgets in the first quarter of 2026¹. The Welsh Government has not undertaken a formal consultation on the instrument, stating there is no requirement to consult¹.

What happens next

The instrument is subject to approval of the Senedd under the draft affirmative procedure, by virtue of section 13A(4) and (8) of the Local Government Finance Act 1992¹. The regulations must be made prior to 31 January preceding the financial year, the date by which a local authority must make its scheme¹.